Simon Williamson

SAA: behaving like a business

2012-06-06 07:35

Simon Williamson

From August South African Airways will cease its direct flights between Cape Town and London, and instead ticket passengers through Johannesburg. According to Fin24 the airline’s commercial general manager, Theunis Potgieter, said it was due to profitability, adding “It is also clear that we would lose money on the direct route in the future.”
For all the justified slamming SAA gets when it loses money (in spite of an airline being a notoriously difficult way to make money, even in the good times), this occasion should be celebrated. SAA has made a positive decision towards profitability. It has responded to the markets. In short: it is behaving like a real business.
London to Cape Town is a notoriously expensive route to fly direct. I searched for the lowest fares I could find on both SAA and British Airways, and the cheapest I could find was indeed SAA, with a starting fare of £869 (R11 285). On British Airways it was £905.49 (R11 759).

I only checked the fares coming into Cape Town because I am sure the critics in Cape Town understand that this was a market decision: if Capetonians were regularly flying between Cape Town and London on SAA this decision would not have been made.

Profit margins
I would also like to think that people are not bleating in disgust because they wish SAA to continue to fly an unprofitable route. Expansion into Africa is where SAA sees its largest growth potential.
While flying direct is everyone’s ideal, the market has to buy into it for success. At a base price of over R11 000 for people coming in, which is slightly less for South Africans flying out, it is no surprise that other airlines have capitalised, making a cheaper one-stop flight seem appealing to passengers. Within just a few minutes I found fares from London to Cape Town on Emirates for £770 (R9 998), Turkish Airlines for £700 (R9 086) and Qatar Airways for £696 (R9 037). That’s a potential saving of nearly R3 000 per ticket.
It is also worth pointing out that the transfer at Johannesburg’s OR Tambo airport doesn’t involve masses of waiting – by my rudimentary count there are 46 flights between Johannesburg and Cape Town on an average weekday, 20 of which are operated by SAA (departing virtually every hour) and another four by Mango (SAA’s low-cost airline).
Some folks pointed to British Airways adding a direct flight to its Cape Town-London route, but this was only for summer: Cape Town’s peak tourist season.

A few major international airlines only run flights to Cape Town in its tourist season. British Airways can also afford to run at a lower profit margin, as it is a far larger airline (SAA has less than 60 aircraft and serves 34 destinations while British Airways has nearly 250 aircraft and serves 170).

Also bear in mind that SAA’s Potgieter said that the route looked to become unprofitable “in the future”. There is no telling what British Airways might do in time (although, as things stand, there remain two per day in December 2012). Indeed, SAA has developed vision.
SAA is a business

We have a national airline owned by the government, and it is in all of our best interests for the thing to turn a profit, lest we continue to plug taxpayer cash into it every year.
And before you bang on about selling it – don’t expect a privately-owned airline to be any kinder. SAA is a business. It (hopefully) aims to make profit, not do favours.
So before you fill up your lungs, ready to enunciate SAA-hate speech, be careful of shouting something along the lines of “SAA STOP WASTING MONEY BUT CARRY ON FLYING UNPROFITABLE ROUTES”.

Simon Williamson is a freelance writer.

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